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Pitfalls of Medicaid expansion

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By Matthew Glans
Friday, March 14, 2014, 8:57 p.m.

Medicaid expansion is an expensive endeavor that studies show does not provide better or more-affordable health care. Many of the expansion plans that Pennsylvania legislators are considering would use federal dollars to expand the state's Medicaid program to more people, creating new costs that the federal government may not always be willing or able to cover, leaving state taxpayers on the hook for the new liabilities.

Pennsylvania has yet to approve an expansion of Medicaid. But in September 2013, Gov. Tom Corbett released a proposal that would accept federal funds and extend Medicaid to about 500,000 individuals, who would be moved into the ObamaCare federal health insurance exchange.

Like several other programs being considered in other states, Corbett's proposal, known as “Healthy PA,” emulates Arkansas' premium assistance model. Under the Arkansas model, the state provides funds for those newly eligible for Medicaid to purchase private insurance through the ObamaCare insurance exchange. Medicaid recipients choosing the private option would face many of the same requirements as traditional Medicaid beneficiaries, including co-pays and a premium-sharing requirement. Participants would be required to pay a portion of their premiums, up to $35 per month.

According to the Commonwealth Foundation, Healthy PA would make several changes to the state's current Medicaid program, including a reduction in the cap on certain medical services, which would cut the funds managed care organizations use to pay doctors; a reduction in the number of benefit packages in traditional Medicaid from 14 to two; a premium-sharing requirement based on a sliding scale of $1 to $25 per month; and new co-pays for doctor visits..

Healthy PA has several shortcomings. First, despite the private-market feel of the program, it still represents an expansion of Medicaid, where multiple aspects of the insurance plan are dictated by the federal government and the beneficial aspects of real market competition are lost. Second, once expansion occurs, it will be extremely difficult to roll back.

Medicaid expansion is expensive. According to the Kaiser Family Foundation, expansion in Pennsylvania would add $43 billion to the federal deficit over the next 10 years.

The Congressional Budget Office has estimated that a plan like Healthy PA could cost state taxpayers an additional $3,000 per enrollee.

One alternative states should consider is the pilot program currently underway in Florida, known as the “Medicaid Cure.” The program is a premium support model that provides existing Medicaid recipients with a range of premiums and plans from which to choose, dramatically improving health care competition and consumer choice. The results have been promising; the Florida Agency for Health Care Administration found a 64 percent improvement in health outcomes over managed care and an 83 percent satisfaction rate.

Without significant reforms, Medicaid will remain fiscally unsustainable. Instead of expanding a flawed model that is overly costly, delivers subpar health care and shifts more power to the federal government, state lawmakers should focus instead on reform options like those piloted in Florida, which reduce costs and offer better care.

Matthew Glans is senior policy analyst for The Heartland Institute.

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